Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Revenue Recognition

v3.19.1
Note 4 - Revenue Recognition
 9 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
(
4
)
Revenue Recognition
 
We implemented ASC
606
in the
first
quarter of fiscal
2019
using the cumulative effect approach, which required us to apply the new guidance retrospectively to revenue transactions completed on or after
July 1, 2018.
Adopting this new standard did
not
have a material impact on our consolidated financial statements, but did result in enhanced disclosures.
 
Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment, control typically transfers when the product is shipped. For sales in our retail segment, control generally transfers upon delivery to the customer.
 
Estimated refunds for returns and allowances are recorded using our historical return patterns. Under the new standard, we record estimated refunds for sales returns on a gross basis rather than on a net basis and have recorded an asset for product we expect to receive back from customers in
Prepaid expenses and other current assets
and a corresponding refund liability in
Accrued expenses and other current liabilities
on our consolidated balance sheets. At
March 31, 2019,
these amounts were immaterial.
 
In many cases we receive deposits from customers before we have transferred control of our product to our customers, resulting in contract liabilities. These contract liabilities are reported as a current liability in
Customer Deposits
on our consolidated balance sheets. At
June 30, 2018
we had customer deposits of
$61.2
million, of which we recognized net sales of
$1.4
million and
$59.3
million respectively, during the
three
and
nine
months ended
March 31, 2019.
Customer deposits totaled
$62.4
million at
March 31, 2019.
 
Upon adoption of ASC
606,
we have elected the following accounting policies and practical expedients:
 
 
-
We recognize shipping and handling expense as fulfillment activities (rather than as a promised good or service) when the activities are performed even if those activities are performed after the control of the good has been transferred. Accordingly, we record the expenses for shipping and handling activities at the same time we recognize net sales.
 
 
-
We exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes).
 
 
-
We do
not
adjust net sales for the effects of financing components if the contract has a duration of
one
year or less, as we believe that we will receive payment from the customer within
one
year of when we transfer control of the related goods.
 
The following table disaggregates net sales by product category by segment for the
three
months ended
March 31, 2019:
 
(Unaudited, amounts in thousands)
  
Wholesale
    
Retail
    
Total
  
Upholstery furniture
   $
53,071
     $
62,351
     $
115,422
  
Case goods furniture
    
37,575
      
40,958
      
78,533
  
Accents
    
19,516
      
30,028
      
49,544
  
Other
    
(1,795
 )    
5,610
      
3,815
  
Total before intercompany eliminations
   $
108,367
     $
138,947
      
247,314
  
Eliminations
    
 
      
 
      
(69,485
 )
Consolidated Net Sales
    
 
      
 
     $
177,829
  
 
The following table disaggregates net sales by product category by segment for the
nine
months ended
March 31, 2019:
 
(Unaudited, amounts in thousands)
  
Wholesale
    
Retail
    
Total
  
Upholstery furniture
   $
162,817
     $
195,667
     $
358,484
  
Case goods furniture
    
116,326
      
131,728
      
248,054
  
Accents
    
58,774
      
97,644
      
156,418
  
Other
    
(3,820
 )    
17,630
      
13,810
  
Total before intercompany eliminations
   $
334,097
     $
442,669
      
776,766
  
Eliminations
    
 
      
 
      
(214,000
 )
Consolidated Net Sales
    
 
      
 
     $
562,766
  
 
 
-
Upholstery furniture includes fabric-covered items such as sleepers, recliners and other motion furniture, chairs, ottomans, custom pillows, sofas, loveseats, cut fabrics and leather.
 
 
-
Case goods furniture includes items such as beds, dressers, armoires, tables, chairs, buffets, entertainment units, home office furniture, and wooden accents.
 
 
-
Accents includes items such as window treatments and drapery hardware, wall décor, florals, lighting, clocks, mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings and home and garden furnishings.
 
 
-
Other includes net sales for product delivery, the Ethan Allen Hotel room rentals and banquets,
third
-party furniture protection plans, non-inventoried parts, and consulting and other fees, net of discounts, allowances and other sales incentives.